**Update (July 29, 2013): Governor Quinn signed HB2262 into law, eliminating the asset test in the Temporary Assistance for Needy Families (TANF) Program.

Today the Illinois Senate passed legislation that saves our state nearly $1 million annually, while removing a significant barrier that prevents Illinois’ poorest families from saving money.  HB2262, which passed out of the House with bipartisan support last month, will eliminate the “asset test” in the Temporary Assistance for Needy Families (TANF) program.

The “asset test” is part of the eligibility standards for TANF in Illinois, and means that a family of three, seeking TANF assistance or currently receiving assistance, cannot own more than $3,000 in savings. Without emergency savings families are unable to pay for car repairs, emergency healthcare, or unexpected child care expenses. They are left financially vulnerable and even more in need of public assistance.

Sponsored by Representative Gabel and Senator Hunter, this legislation encourages savings and will allow families to gain financial independence.  The bill now heads to Governor Quinn’s desk for his signature.

The TANF Asset Test has prevented our poorest families from building the savings they need to weather unexpected expenses and become financially stable. By eliminating the asset test we save the state in much needed administrative costs and allow families to preserve the few resources they have, like emergency or college savings, and avert financial disaster.

In addition to harming families, the TANF Asset Test was also unnecessarily costing the state. The Illinois Department of Human Services (IDHS) estimates it spent $960,000 worth of caseworker time checking TANF families’ assets last year. Of the 192,000 individual TANF eligibility reviews conducted last year, IDHS found only 8 cases where the family’s assets exceeded $3,000.

The TANF Asset Limit is a relic of the time before welfare reform when there was no work requirement. The strict work requirements and time limits that define the TANF program today deter anyone with alternative means from applying for assistance. TANF recipients are now required to participate in work-related activities for 30 hours per week. Given these built in deterrents, asset limits have become outdated, unnecessary, and harmful for families.

Efforts to eliminate the TANF Asset Test were led by IABG and its lead partner organizations, the Sargent Shriver National Center on Poverty Law, the Woodstock Institute, Heartland Alliance, and Community Organizing for Family Issues (COFI).

Throughout 2012 the Consumer Financial Protection Bureau (CFPB) sought insight into effective financial education from organizations across the the country. Through an Request For Information (RFI) process and individual meetings at four regional sites, the CFPB compiled and distilled the lessons learned from the field. Last fall IABG partnered with Heartland Human Care Services Asset Building Program to submit comments in response to this RFI, and many of our own lessons learned in the field are mirrored here in CFPB’s report. What they found was that “more successful programs, by comparison, build on individual successes around money. These organizations use what the client is doing right, and show them how they can do even better. For example, programs that focus on planning and building tend to be more successful than programs focused on learning, repairing, or fixing.”

In the document Feedback from the Financial Education Field, the CFPB provides advice on how to “make it STIC” (Salient, Timing, Integration, Comprehensive).

Make it STIC – Four keys to making your financial education services more effective.

Make it Salient

• Create culturally appropriate and language accessible materials – This is relevant for not only non-English speakers, but native English speakers as well as instruction in plain-language are received better.
• Present information at levels that consumers can understand – Presenting in a clear straightforward way reduces feelings of being overwhelmed with information.
• Focus on behavior change – Customize financial education strategies to focus on aligning behavior to successfully navigate the financial services marketplace and achieve their goals.
• Context Matters – Use strategies that incorporate lessons about behavior. For example: reduce hassles by eliminating long forms or waiting lines, and increase participation through default-in instead of opt-in.

Timing is Key

• Start financial education young – Begin in elementary school continuing all the way to high school.
• Use “teachable moments” – Clients who are ready to buy a home, need a bank account for a new job’s direct deposit, or want to get out of a cycle of  debt are highly motivated to learn and adopt positive behavior changes.
• Go where consumers are – Providing financial education in locations like workplaces, schools, or community centers at convenient times increases access and participation.
• Technology can complement face-to-face services – Text reminders about plans, goals or payments, or skype counseling and be effective reinforcing methods.

Integration Within Other Systems

• Use “Touch points” – Pairing financial education with relevant existing services like employment services where case workers have been trained in financial education can lead to better outcomes for both individual service programs.
• Integrating financial education in the school system – Systemic integration into existing K-12 curricula is a promising, but underutilized practice as reaching students early can help transition them into adulthood where they make important financial decisions.

Make it Comprehensive

• Identify government systems to embed financial education – Using existing touch points like receiving government benefit payments increases effectiveness.
• Make Financial Education a continuum over a lifetime – Financial education cannot be a one-time intervention, but must continue over a lifetime as our financial decisions change.
• High-touch financial education approaches are promising – Financial coaching has shown positive outcomes by personalizing a financial plan to reach identified goals.

CFPB’s Future Involvement in Financial Education

The CFPB’s Office of Financial Education (OFE) plans to expand the already available list of publication resources that financial education providers might find useful. Programs can order up to 300 copies of the initial set of resources free. In addition, expect future information and resources on the effectiveness of financial coaching and which types of financial education knowledge lead to the best outcomes. Lastly, they have already started their Innovation Project which will pilot test behaviorally informed strategies for financial decision making. We will continue to keep you informed of useful CFPB updates as well as any new research, policies, best practices, and regulations related to asset building.

The Economic Awareness Council (EAC) provides financial capability programming to over 13,000 youth and family members each year. Their programs provide skills-based training on basic financial education concepts such as banking, saving, budgeting, credit, investing, and career development. Focusing on the application of financial education, behavior change and peer motivation, EAC provides students the opportunity to create their own budget, set savings goals, and make a financial plan. Students are given real opportunities to begin to bank and save at school.

In 2010, the EAC was selected to lead the first statewide teen and young adult focused saving initiative for the Consumer Federation of America‘s, America Saves program. Through Young Illinois Saves, an extension of the America Saves initiative, over 2,500 youth have set savings goals and pledged to save over $1,000,000 each year in aggregate. EAC has also helped over 500 youth  open savings accounts for the first time.

A Story of Impact
Darianna attends a community school that is part of Young Illinois Saves.  Darianna did not have a bank account nor had she saved previously. Through Young Illinois Saves, Darianna set a savings goal and created a financial plan while learning  the basics of budgeting, banking, saving, credit and investing. She was trained in and excelled at providing younger students at her school with information about budgeting and saving. After being accepted at an internship through a Young Illinois Saves bank partner, Darianna completed an article about saving that was published nationally. Later, Darianna applied for and was accepted to another part time position after her internship and continues to visit the bank bi-weekly to deposit her savings.

Asset Building – A Key Program Component
As EAC had more success stories like Darianna’s, asset building increasingly became more of a focus for the EAC.  A significant percentage of the youth and their families the EAC serves are unbanked.  These families traditionally use fringe financial products such as check cashing and payday lending to meet their basic banking needs. These non-mainstream banking services come with much higher fees which further strain their already limited resources. The EAC has found that offering youth the access to financial tools to bank and save in a practical experience has been critical. Furthermore, providing a class the opportunity to bank and save motivates the entire class and helps to create a culture of learning and saving as students learn from their peers.